DEVELOPING INFORMATION TECHNOLOGY STRATEGY FOR BUSINESS VALUE
Journal of Information Technology Management
ISSN #1042-1319
A Publication of the Association of Management
DEVELOPING INFORMATION TECHNOLOGY STRATEGY FOR
BUSINESS VALUE
HEATHER A. SMITH
QUEEN’S SCHOOL OF BUSINESS, QUEEN’S UNIVERSITY, KINGSTON, ON, CANADA
hsmith@business.queensu.ca
JAMES D. MCKEEN
QUEEN’S SCHOOL OF BUSINESS, QUEEN’S UNIVERSITY, KINGSTON, ON, CANADA
jmckeen@business.queensu.ca
SATYENDRA SINGH
QUEEN’S SCHOOL OF BUSINESS, QUEEN’S UNIVERSITY, KINGSTON, ON, CANADA
ssingh@business.queensu.ca
ABSTRACT
Developing information technology (IT) strategy that supports and is supported by business strategy is critical for
generating business value in today’s organizations. In the face of rapidly changing business conditions and continuously evolving
IT, however, organizations have yet to learn how to develop an effective IT strategy. To explore and understand the issue, we
conducted a research using focus group methodology. The results from our research suggest that there are five critical success
factors that organizations must consider. The research also identifies five practices and the challenges faced while developing an
effective IT strategy.
Keywords: strategy development, IT strategy, IT alignment, IT planning, focus group
INTRODUCTION
Despite the ongoing debate about the strategic
value of information technology (IT) [e.g., 4, 21, 23], the
role of IT within organizations is evolving. Instead of being
relegated to the backrooms of the enterprise, IT is now
being invited to the boardrooms and is being expected to
play a leading role in delivering top line value and business
transformation [34]. Weiss and Anderson [37] in their
research found that increasingly CIOs and IT professionals
are assuming change and risk management roles. They are
facing both internal and external pressures to solve both
business and technical problems. Gottshalk [13] found
similar results too that IT leaders are assuming significant
organizational roles including the role of a change leader
and having the responsibility for strategic alignment of IT
and business. With this augmentation in the critical
responsibilities of IT’s role, it can no longer be assumed that
business strategy will naturally drive IT strategy as has
traditionally been the case. Instead, different approaches to
strategy development are desirable. The capabilities of
emerging IT shape the strategic direction of a firm (e.g., ebusiness, wireless). It enables new competencies that make
new business strategies possible (e.g., just-in-time
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DEVELOPING INFORMATION TECHNOLOGY STRATEGY FOR BUSINESS VALUE
inventory). It allows new business governance options for
how a firm works with other firms. (e.g., Wal-Mart or Dell
Computer). However, whichever way IT strategy is
developed, if IT is to deliver business value, IT strategy and
business value must always be closely linked [2, 8]. For
CIOs and other executives, it is one of the top business
concern [19].
Ideally, therefore IT and business strategies should
complement and support each other relative to the business
environment. Strategy development should be a two-way
process between IT and business. However, we have yet to
learn how to do this. For instance, both in the alignment and
the planning literatures we still see the evidence that
achieving an effective alignment between IT and business
strategies and doing an effective IT planning remain
perennial problems [11, 16, 20, 27]. Research has already
identified many organizational challenges to effective IT
strategy development. If organizations strategy development
processes are not compatible (e.g., if they take place at
different times or involve different levels of business), it is
unlikely that business and IT will be working towards the
same goals at the same time [11].
With IT becoming so much more central to the
development and delivery of business strategy, much more
attention needs to be paid to IT strategy development than it
has been paid in the past. What businesses want to
accomplish with their IT and how IT shapes its own
delivery strategy is increasingly vital to the success of an
organization. To explore how organizations are working to
improve IT strategy development, the authors convened a
focus group of senior IT managers from a variety of
industries.
This paper first describes the focus group
methodology used in this research. Then, it looks at how our
understanding of IT strategy has changed over time. Next, it
discusses some critical success factors for IT strategy
development, followed by how some organizations are
beginning to evolve a more formal IT strategy development
process. Finally, the paper examines some of the challenges
organizations are facing in developing an effective IT
strategy.
RESEARCH METHODOLOGY
Due to the exploratory nature of this research we
decided to use focus group methodology. While focus group
methodology can be used for both exploratory and
confirmatory research [32], it is particularly well suited for
exploratory research. The methodology is widely employed
in various disciplines as a qualitative research technique
[22]. It entails a process of obtaining possible ideas or
solutions to a problem from a group of participants by
discussing [32]. What constitutes focus group methodology
is still debated in the literature but “most researchers seem
to agree on at least a few characteristics: they should consist
of a relatively small group of people (usually 7-12), led by a
moderator, discussing a particular topic for 90-120 min” [9,
p.719 ]. The main advantage of the methodology is based on
the kind of data it generates. Krippendork [18] differentiates
between emic data that which arises in a natural or
indigenous form and etic data that which represents the
researcher’s imposed view of the situation. While pure
forms of data are rarely obtained in practice, focus group
data is much more emic. As a result, focus groups are
extremely useful in obtaining general background
information about a topic, generating research hypotheses
for further research, stimulating new ideas, learning what
and why individuals think about the phenomenon of
interest, and interpreting previously obtained quantitative
results [1, 14].
Senior IT managers from 15 different
organizations were invited to attend a full-day focus group.
Focus group participants represented consulting,
manufacturing, insurance, banking and financial,
government, retail, telecommunication, automotive and
pharmaceutical institutions. The managers were asked to
describe the processes their organization uses to develop
their IT strategies. In addition, they were asked to assess the
relative importance of the strategic use of IT in their firm,
how IT strategy is associated with business strategy and
how well senior business managers include IT in the
development of their business strategies.
The participants were also asked to bring any
corporate documents which they considered relevant to the
topic. The discussion was moderated by one of the authors
while the others recorded the discussion independently. The
authors actively pushed for clarification of discussion and
prompted participants to share actual experiences of specific
events within their organizations in order to make
arguments and concepts as concrete as possible. The
participants were forthcoming with examples to support
their observations of organizational phenomena. The
research also relied on data collected from the participating
organizations’ Web sites. Further, while analyzing the data,
e-mail and telephone communications were also conducted
with a few participants in order to get more details and
clarification on some of their responses. Our findings are
based on an analysis of the focus group discussion in
juxtaposition against the published literature on the topic.
Our goal was to let practice inform theory and vice versa.
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DEVELOPING INFORMATION TECHNOLOGY STRATEGY FOR BUSINESS VALUE
IT STRATEGY: PAST, PRESENT
AND FUTURE
At the highest level, a strategy is an approach to
doing business [12]. Traditionally, a competitive business
strategy has involved performing different activities than
competitors or performing similar activities in different
ways [24]. Ideally, these activities were difficult or
expensive for others to copy and therefore resulted in a
long-term competitive advantage [12]. They thus enabled
firms to charge a premium for their products and services.
In the past, the job of an IT function was to
understand the business’ strategy and then figure out a plan
to support it. However, all too often, IT’s strategic
contribution was inhibited by IT managers’ limited
understanding of business strategy and by business
managers’ poor understanding of IT’s potential. Therefore,
most formal IT plans were focused on more tactical and
tangible line of business needs or opportunities for
operational integration rather than on supporting enterprise
strategy [3]. And investment opportunities were selected
largely on their basis to affect the short-term bottom line
rather than on delivering long-term top line business value.
As a result, instead of looking for ways to be different, in
the last decade, much business strategy became a relentless
race to compete on efficiencies with IT as the primary
means of doing so [15, 24]. Companies’ improved
information processing capabilities were used to drive down
transaction costs to near zero, threatening traditional value
propositions and shaving profit margins.
In the present, IT is leading to considerable
disruption as business models in many industries (i.e., the
way companies add value) are under attack by new
technology-enabled approaches to delivering products and
services (e.g., the music industry, book-selling). Today
“strategists [have to] honestly face the many weaknesses
inherent in [the] industrial-age ways of doing things. They
[must] redesign, build upon and reconfigure their
components to radically transform the value proposition.”
[33]. Such new business strategies are inconceivable
without the use of IT. Other factors, also facilitated by IT,
are further influencing business strategy. Increasingly,
globalization is altering the economic playing field. As
countries and companies become more deeply interrelated,
instability is amplified. Instead of being generals plotting
out a structured campaign, business leaders are now more
likely to be participating in guerilla warfare [10]. Flexibility,
speed and innovation are therefore becoming the
watchwords of competition and must therefore be
incorporated into any business through IT [15, 30].
These new conditions have dramatically elevated
business’ attention to the value of IT strategy. Now,
business executives recognize that it is a mistake to consider
IT related decisions to be solely the responsibility of IT [28].
There is a much greater understanding that business
executives have to take a more prominent role in IT related
decisions so that IT strategy shapes and/or complements
business strategy [19]. At present, there is recognition
among the top executives of most organizations that
problems with IT strategy are largely the fault of leaders
who “failed to realize that adopting … systems posed a
business -- not just a technological -- challenge” and didn’t
take responsibility for the organizational and process
changes that would deliver business value [29]. This
awareness among executives has elevated the importance of
IT strategy. Many members of the focus group remarked
that their executive team now understands the potential of
IT to affect the top line. “IT recently added some new
distribution channels and our business has just exploded,”
stated one manager. Others are finding that there is a much
greater emphasis on IT’s ability to grow revenues and this is
being reflected in how IT budgets are allocated and
investments prioritized. “Our executives have finally
recognized that business strategy is not only enabled by IT
but that it can provide new business opportunities as well,”
said an IT manager. This is reflected in the changing
position of the CIO and IT leadership in most of the focus
group organizations over the last decade. “Today, our CIO
sits on the executive team and takes part in all business
strategy discussions, because IT has credibility,” said a
focus group member. “Our executives now want to work
closely with IT and understand the implications of
technology decisions,” said another “It’s not the same as it
was even five years ago.” Today, CIOs are valued for their
insights into business opportunities, their perspective across
the entire organization and their ability to take the long-term
view.
However, this does not mean that organizations
have become good in developing an effective IT strategy.
“There are many inconsistencies and problems with strategy
development,” said a participant. Organizations have to
develop new strategy-making capabilities to cope in the
future competitive environment. This will mean changing
their current top-down method of formulating and
implementing strategy.
If there’s one thing leading
academics have agreed on, it is that future strategy
development will have to become a more dynamic and
continuous process [10, 17, 25, 26, 36]. Instead of business
strategy being a well-crafted plan of action for the next 3-5
years, from which IT can devise an appropriate and
supportive IT strategy, business strategy must become more
and more evolutionary and interactive with IT. IT strategy
development must therefore become more dynamic itself
and focused on developing strategic capabilities that will
support a variety of changing business objectives. Thus, in
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the future, managers will participate in an organic strategy
development process that will continually evolve IT and
business plans in concert with each other [6, 25].
CRITICAL SUCCESS FACTORS
FOR DEVELOPING IT STRATEGY
While each focus group member had a different
approach to developing their IT strategy, there was broad
general agreement that five factors had to be in place for
strategic development to be effective.
Revisit your Business Model
Business models and strategies are often confused
with each other [28]. A business model explains how the
different pieces of a business fit together. It ensures that
everyone in an organization is focused on the kind of value
a company wants to create. Only when the business model
is clear, strategies can be developed to articulate how a
company will deliver that value in a unique way that others
cannot easily imitate [28]. Thus, it is essential that all
managers including IT and business managers completely
understand how their business as a whole works. While this
sounds like a truism, almost any IT manager can tell “war
stories” of business managers who have very different
visions of what they think their enterprise should look like.
The worlds of IT and business have traditionally
been isolated from each other, leading to misaligned and
sometimes conflicting strategies. Although there is now a
greater willingness among business managers to understand
the implications of technology in their world, it is still IT
that must translate their ideas and concepts into business
language. “IT must absolutely understand and focus on the
business,” said an IT manager in the focus group.
Adopt Strategic Themes
IT strategy used to be about individual projects.
Now it is about carefully crafted programs that focus on
developing specific business capabilities. Each program
consists of many smaller, inter-related businesses and IT
initiatives that cut across several functional areas. These are
designed to be adapted, reconfigured, accelerated or
cancelled as the strategic program evolves. Themes give
both business and IT managers a broad yet focused topic of
interest that challenges them to move beyond current
operations [17]. For example, one retail company decided it
wanted to be “a great place to work”. A bank selected ebanking as critical differentiator. Both firms used a theme
to engage the imaginations of their employees and mobilize
a variety of ideas and actions around a broad strategic
direction. By grouping IT and business programs around a
few key themes, managers find it easier to track and direct
important strategic threads in an organization’s development
and to visualize the synergies and interdependencies
involved across a variety of programs spread out across the
organization and over time.
Get the Right People Involved
One of the most important distinguishing factors
between companies that get high IT business value and
those that do not is that senior managers in high performing
companies take a leadership role in IT decision-making.
Abdication of this responsibility is a recipe for disaster [29].
“In the past, it was very hard to get the right people
involved,” said a manager. “Now it’s easier,” another
noted, “You don’t send a minion to an IT strategy meeting
anymore; it’s just not done.” The managers in the focus
group indicated that in their organizations, the CIO and
other IT managers typically meet regularly with the
President and senior business leaders to discuss both
business and IT strategies.
Getting the right people involved also means
getting line of business managers and other key stakeholders
involved in IT strategy as well. To do this, several focus
group organizations have established “account manager”
positions in IT to work and learn about the business and
suggest opportunities for using IT. Research shows that the
best strategies often stem from grass-roots innovations and it
is therefore critical that organizations take steps to ensure
that good ideas are nurtured and not filtered out by different
layers of management [17]. “We have two levels of
strategy development in our organization,” said a focus
group participant. “Our account managers work with
functional managers and our CIO works with our business
unit presidents on the IT Steering Committee.” This
company also looks for cross-functional synergies and
strategic dependencies by holding regular meetings of IT
account managers and between account managers and
infrastructure managers.
Work in Partnership with the Business
Successful strategy demands a true partnership
between IT and business, not just use of the term. Strategy
decisions are best made with input from both business and
IT executives [29]. Focus group members agreed. “Our
partnerships are key to our success,” stated a manager. “It’s
not the same as it was five years ago. People now work
very closely together.” Partnership is not just a matter of
“involving” business leaders in IT strategy or vice versa or
“aligning” business and IT strategy. Today, effective
strategizing is about “continuous and dynamic
synchronization of capabilities” [25]. “Our IT programs
need synchronizing with business strategy – not only at a
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DEVELOPING INFORMATION TECHNOLOGY STRATEGY FOR BUSINESS VALUE
high level but right down to the individual projects and the
business changes that are necessary to implement them
properly,” said a focus group participant.
Balancing IT Investment Opportunities
One of the many challenges of developing
effective IT strategy is the fact that technology can be used
in so many different ways. The opportunities are practically
limitless. Unfortunately, the available resources are not.
Thus, a key element of IT strategy is determining how best
to allocate the IT budget. This issue is complicated by the
fact that most businesses today require significant IT
services just to operate. Utility and basic support costs eat
up between 30 to 70% of the focus group members’
budgets. That’s just the cost of “keeping the lights on” –
running existing applications, fixing problems, and dealing
with mandatory changes (e.g., new legislation). IT strategy
therefore must consider two important components: (1)
how to do more with less, i.e., driving down fixed costs; and
(2) how to allocate the remaining budget towards those IT
investment opportunities that will support and further the
organization’s business strategy.
In order to do more with little budget, with
occasional exceptions, CIOs and their teams are mostly left
alone to determine the most cost-effective way of providing
the IT utility to their organizations. This has led to a variety
of IT focused initiatives to save money including
outsourcing, shared services, use of ASPs, and most
recently, grid computing. However, it is the way that IT
allocates the rest of its budget that has captured the attention
of business strategists. “It used to be that every line of
business had an IT budget and that we would work with
each one to determine the most effective way to spend it,”
said a focus group manager. “Now, there is much more
recognition that the big opportunities are at the enterprise
level and cut across lines of business.”
Focus group members explained they usually face
five types of IT investment opportunities to further business
strategy. Determining the balance between the opportunities
is a significant component of how IT strategy delivers
business value. In a way, organizations have to adopt a
portfolio approach to IT investments [35]. Too much or too
little focus on one type of investment can mean a failure to
derive maximum value from a particular strategic business
theme. The five investment opportunities (i.e., business
improvement, business-enabling, business opportunities,
opportunity leverage, and infrastructure) are described
below.
Business Improvement. These are the reengineering initiatives to help organizations to streamline
their processes and save substantial amounts of money by
eliminating unnecessary or duplicate activities or
empowering
customers/suppliers
to
self-manage
transactions with a company. Weil and Aral [35] refer to
such investments as transactional investments. The IT
investment in these initiatives is the easiest to agree on
because they focus on relatively low risk investments with a
tangible short to medium term payback. Easy to justify with
a business case, these types of investments have
traditionally formed the bulk of IT’s discretionary spending.
“Cost reduction projects have and always will be important
to our company,” stated one focus group manager.
“However, it is important to balance what we do in this area
with other types of equally-important projects that have
often been given short shrift.”
Business-Enabling. The investment in
business enabling initiatives can be considered
informational investments [35]. The business enabling IT
initiatives extend or transform how a company does
business. As a result, they are more focused on the top-line
or revenue-growing aspects of an enterprise. For example, a
data warehouse could enable different parts of a company to
“mine” transaction information to improve customer
service, assist target marketing, better understand buying
patterns, or identify new business opportunities. Adding a
new web-based channel could make it easier for customers
to buy more or attract new customers. A customer
information file could make it easier for a customer to do
business with a company (e.g., one address change) and also
facilitate new ways of doing business. Often, the return on
these types of investments is less clear and as a result, it has
been harder to get them on the IT priority list. Yet, many of
these initiatives represent the foundations on which future
business strategy is built. For example, one CIO described
the creation of a customer information file as “a key enabler
for many different business units…. It has helped us build
bench strength and move to a new level of service that other
companies cannot match.” [31].
Business Opportunities. These are small
scale, experimental initiatives designed to test the viability
of new and emerging IT to support business. Given the rate
at which IT evolves, it often makes currently available IT
outdated, thus experimenting with new IT is extremely
critical [5]. In the past, these types of investments have not
received funding by traditional methods because of their
high risk nature. Often, it has been left up to the CIO to
scrounge money for such “skunkworks”. These days, there
is a greater recognition of the potential value of strategic
experiments in helping companies to learn about and
prepare for the future. In some focus group companies, the
CEO and CFO have freed up seed money to finance a
number of these initiatives. However, while there is
considerably more acceptance for such investments, there is
still significant organizational resistance to financing
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DEVELOPING INFORMATION TECHNOLOGY STRATEGY FOR BUSINESS VALUE
investments for which the end results are unpredictable [26].
In fact, it typically requires discipline to support and
encourage experiments, which by definition, will have a
high number of false starts and wrong moves [17]. The
focus group agreed that the key to benefiting from
experiments is to design them for learning, incorporate
feedback from a variety of sources and make quick
corrections of direction.
Opportunity Leverage. A neglected, but
important type of IT investment is one that operationalizes,
scales up, or leverages successful strategic experiments or
prototypes. “We are having a great deal of success taking
advantage of what we have learned earlier,” said one focus
group manager. Coming up with a new strategic or
technological idea needs a different set of skills than is
required to take full advantage of it in the marketplace [7].
Some companies actually use their ability to leverage
others’ ideas to their strategic advantage. “We can’t
compete in coming up with new ideas,” said the manager of
a medium-sized company, “but we can copy other peoples’
ideas and do them better.”
This final type of IT
Infrastructure.
investment is one that often falls between the cracks when
IT and business strategies are developed. However, it is
clear that the hardware, software, middleware,
communications and data available will affect an
organization’s capacity to build new capabilities and
respond to change. A recent study found that most
companies feel their legacy infrastructure can be an
impediment to what they want to do [25]. Research also
shows that leading companies have a framework for making
targeted investments in their IT infrastructure that will
further their overall strategic direction [36]. Unfortunately,
investing in infrastructure is rarely seen as strategic. As a
result, almost all focus group companies are struggling with
how to justify and appropriately fund it.
While each type of investment described above
delivers a different type of business value, typically IT
strategy has stressed only those initiatives with strong
business cases. Others are shelved or struggle for a very
small piece of the pie. However, there was a general
recognition in the focus group that this approach to
investment leads to an IT strategy with a heavy emphasis on
the bottom line. As a result, all focus group companies were
looking at new ways to build a strategy development
process that reflects a more appropriate balance of all
dimensions of IT strategy.
TOWARDS AN IT STRATEGY
DEVELOPMENT PROCESS
“Strategy is still very much an art, not a science,”
explained a focus group member, “And it is likely to remain
so.” Strategy will never again be a coherent, long-term plan
with predictable outcomes – if it ever was. Today, “leaders
can’t predict which combinations [of strategic elements]
will succeed [and] they can’t drive their organizations
towards predetermined positions.” [26]. This situation only
exacerbates the problem that has long faced IT strategists.
That is, it is difficult to build systems, information and
infrastructure when a business’ direction is continually
changing and IT is rapidly evolving. Yet, this degree of
flexibility is exactly what businesses are demanding [25].
Traditional IT planning and budgeting mechanisms done
once a year simply will not work in today’s fast-paced
business environment. “We always seem to lag behind the
business, no matter how hard we try,” said a focus group
manager.
Clearly, organizations need to be developing
strategy differently. How to do this is not always apparent,
but several organizations in the focus group were trying
ways to more dynamically link IT strategy with the business
strategy. While no one company in the focus group claimed
to have “the” answer, they did identify several practices that
are moving them more closely towards this goal. The
practices are described below.
“Rolling” Planning and Budget Cycles.
All members of the focus group agreed that IT plans and
budgets need attention more frequently than once a year.
One company has created an 18 month rolling plan that is
reviewed and updated quarterly with the business to
maintain currency.
An Enterprise Architecture. This is an
integrated blueprint for the development of the enterprise –
both business and IT. “Our enterprise architecture includes
business processes, applications, infrastructure, and data,”
said a focus group manager. “Our enterprise architecture
function has to approve all business and IT projects and is
helpful in identifying duplicate solutions.” In some
companies, this architecture is IT-initiated and businessvalidated, whereas in others it is a joint initiative. However,
members warned that an architecture has the potential to be
a corporate bottleneck if it becomes too bureaucratic.
Different Funding “Buckets”. Balancing
short-term returns with the company’s longer-term interests
is a continual challenge. As noted above, all five types of IT
investment are necessary for an effective IT strategy (i.e.,
business improvement, business enabling, business
opportunities, opportunity leverage, and infrastructure).
Thus, a portfolio technique to IT investments is vital. In
order to ensure that each different type of IT is appropriately
funded, many companies are allocating pre-determined
percentages of their IT budget to different types of projects
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[28, 35]. This helps keep continual pressure on IT to reduce
its “utility costs” in order to free up more resources for other
types of projects. “Since we implemented this method of
budgeting, we’ve gone from spending 70% of our revenues
on mandatory and support projects to spending 70% on
discretionary and strategic ones,” said a focus group
manager. This is also an effective way to ensure that IT
infrastructure is continually enhanced. “Leading companies
build their infrastructure not through a few large
investments but gradually through incremental, modular
investments …[that] build IT capabilities.” [36].
Account or Relationship Managers.
There is no substitute for a deep and rich understanding of
the business according to the focus group. This is why
some of them have appointed IT Account Managers to work
closely with key lines of business. These managers help
business leaders to observe their environments
systematically and to identify new opportunities for which
IT could be effective. Furthermore, together, account
managers can identify synergies and interdependencies
between lines of business. One organization holds both
intra- and inter-functional strategy sessions on a regular
basis with business managers to understand future needs,
develop programs, and then design specific roadmaps for
reaching business goals. “Our account managers have been
a significant factor in synchronizing IT and business
strategies,” said a manager.
A Prioritization Rubric. “We don’t do
prioritization well,” said one participant. IT managers have
long complained that it is extremely difficult to justify
certain types of initiatives using the traditional business case
method of prioritization. This has lead to an overrepresentation of business improvement investments in the
IT portfolio and has inhibited more strategic investments in
general capabilities and business opportunities. This
problem is leading some companies to adopt multiple
approaches to justifying IT investments [28]. For example,
business-enabling projects must be sponsored at a crossfunctional level on the basis of the capabilities they will
provide the enterprise as a whole. Senior management must
then take responsibility to ensure that these capabilities are
fully leveraged over time. Infrastructure priorities are often
left up to IT to determine once a budget is set. One IT
department does this by holding strategy sessions between
its account and utility managers to align infrastructure
spending with the organization’s strategic needs.
Unfortunately, no one has yet figured out a way to prioritize
business opportunity experiments. At present, this is
typically left to the “enthusiasms and intuitions” of the
sponsoring managers, either in IT or in the business [28].
“Overall,” said a focus group manager, “we need to do a
better job of thinking through the key performance
indicators we’d like to use for each type of project.”
While it is unlikely that strategy development will
ever become a completely formalized process, there is a
clear need to add more structure to how it is done. A greater
understanding of how strategy is developed will ensure that
all stakeholders are involved and a broader range of IT
investments are considered. While the outcomes of strategy
will always be uncertain, the process of identifying new
opportunities and how they should be funded must become
more systematic if a business is going to realize optimum
value from its IT investments.
CHALLENGES
As often happens in organizations, recognition of a
need precedes the ability to put it into place. IT leaders are
now making significant strides in articulating IT strategy
and linking it more effectively with business strategy.
Business leaders are also more open to a more integrated
process. Nevertheless, there are still important
organizational barriers remaining that often inhibit strategy
development.
First, a supportive governance structure is
frequently lacking. “Now that so many strategies are
enterprise-wide, we need a better way to manage them,”
explained a focus group manager. Often there are no formal
structures to identify and manage interdependencies among
different business processes. “It used to be that everything
was aligned around organizational boundaries, but strategy
is now more complex since we’re working on programs
with broader organizational scope,” said another. Similarly,
current managerial control systems and incentives are often
designed to reward thinking that is aligned to a line of
business, not to the greater organizational good.
Second, enterprise-wide funding models are also
lacking. “Everything we do now requires negotiation for
funding between the lines of business who control the
resources,” one manager stated. Even within IT, the focus
group suggested, it is not always clear who in the
organization is responsible for taking IT strategies and
turning them into detailed IT plans.
Third, traditional planning and budgetary practices
are a further challenge. This is an often-neglected element of
IT strategy. “Our business and IT strategies are not always
done in parallel or even around the same time,” said a focus
group participant. As a result, it is not easy to stay aligned or
to integrate the two sets of plans. Another commented,
“Our business plans change constantly. It is therefore
common for IT strategy to grow farther and father apart
over time.” Similarly, an annual budgeting process tends to
lock an organization into fixed expenditures which may not
be practical in a rapidly changing environment. Today’s IT
Journal of Information Technology Management Volume XVIII, Number1, 2007
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DEVELOPING INFORMATION TECHNOLOGY STRATEGY FOR BUSINESS VALUE
organizations therefore need both a longer term view of
their resourcing practices and the opportunity to make
changes to it more frequently. While rolling budgets are
becoming more acceptable, they are by no means common
in either IT or the business world today.
Fourth, both business and IT leaders need to
develop better skills in strategizing. “We’ve gotten really
good at implementing projects,” said an IT manager.
“Strategy and innovation are our least developed
capabilities.” In recent years, IT has tended to push business
towards better articulation of their goals. “Right now, in
many areas of our business, strategy is not well thought
through,” said another manger. “IT has to play the devil’s
advocate and get them to think beyond generalities such as,
‘we are going to grow the business by 20% this year’”.
With more attention to the process, it is almost certain to get
better, but at present, managers’ rudimentary skills in this
area limit the quality of strategy development.
Finally, over and over, the focus group stressed
that IT strategy is mainly about getting the right balance
between conflicting strategic imperatives. “It’s always a
balancing act between our tactical and operational
commitments and the work that builds our long term
capabilities,” said a participant. Deciding how to make the
trade-offs between the different types of IT work is the
essence of effective strategy. Unfortunately, few businesses
do this very well [3]. According to the focus group,
traditional business thinking tends to favor short term
profitability while IT leaders tend to take a longer-term
view.
Making sure some types of IT work (e.g.,
infrastructure, new business opportunities) are not underfunded while others (e.g., utility, business improvement) are
not over-funded is a continual challenge for all IT and
business leaders these days.
solutions are likely to win big in today’s rapidly-evolving
business environment.
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CONCLUSION
Effective strategy development is becoming vital
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AUTHORS BIOGRAPHIES
James D. McKeen is a Professor of MIS at the School of
Business, Queen's University at Kingston, Canada and is the
founding Director of The Monieson Centre which conducts
multi-university, collaborative research focused on
generating value through knowledge in organizations. Jim
received his Ph.D. in Business Administration from the
University of Minnesota. He has been working in the field
of MIS for many years as a practitioner, researcher, and
consultant and is a frequent speaker at business and
academic conferences. His research has been widely
published in various journals including the MIS Quarterly,
Knowledge Management Research and Practice, the
Journal of Information Technology Management, the
Communications of the Association of Information Systems,
MIS Quarterly Executive, the Journal of Systems and
Software, the International Journal of Management
Reviews, Information and Management, Communications of
the ACM, Computers and Education, OMEGA, Canadian
Journal of Administrative Sciences, Journal of MIS, KM
Review, Journal of Information Science and Technology and
Database. Jim is a co-author of two books on IT
management with Heather Smith – the most recent being
Making IT Happen (Wiley, 2003). He currently serves on a
number of Editorial Boards.
Journal of Information Technology Management Volume XVIII, Number1, 2007
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DEVELOPING INFORMATION TECHNOLOGY STRATEGY FOR BUSINESS VALUE
Satyendra Singh is a doctoral student in Management
Information Systems at the School of Business at Queen's
University. He holds an MBA from Queen’s University, a
Masters in Computer Applications from Andhra
University in India, and a B.Sc from Osmania University
in India. Prior to starting his graduate studies, Mr. Singh
spent 12 years working in the software industry. His
research interests include organizational strategy, IT
strategy, and knowledge management. His papers appear
in journals such as Communications of the AIS, Journal of
Information Science and Technology and the Knowledge
Management Research and Practice. Mr. Singh also
presented his research results at a number of conferences.
Heather A. Smith is Senior Research Associate with
Queen’s University School of Business, specializing in IT
management issues. A former senior IT manager, she is a
founder and co-director (with James McKeen) of the IT
Management Forum, the CIO Brief, and the KM Forum,
which facilitate inter-organizational learning among
senior executives, and co-author (with James McKeen) of
Management Challenges in IS: Successful Strategies and
Appropriate Action (1996). She is also a Research
Associate with the Lac Carling Conference on EGovernment, the Society for Information Management,
and Chair of the IT Excellence Awards University
Advisory Council. Her research is published in a variety
of journals and books including CAIS, JITM, Information
and Management, Database, CIO Canada, and the CIO
Governments Review. Her book, Making IT Happen:
Critical Issues in IT Management with James McKeen
was published by Wiley in January 2003 and she is coauthor of a new book, Information Technology and
Organizational Transformation: Solving the Management
Puzzle published by Butterworth-Heinemann.
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